Gear4music (G4M), the UK's largest online retailer of musical instruments and equipment, said it was on track to meet full-year market expectations after steady trading in the first half of 2024.
The company has been focused on improving gross margin rather than chasing sales growth, which meant that although gross margins improved to 27.1% from 26.3% a year earlier, gross profit itself slipped marginally to £17m as sales slipped 6% to £62.6m.
That reflects a tough market for discretionary consumer products, especially in Europe, where sales fell 15% to £26.1m in contrast to the 3% improvement in UK revenues. That’s why Gear4Music has also worked hard to reduce costs. It said that cost-saving initiatives implemented in FY24 H1 are expected to yield £4.0 million in annual cash savings, with a 20% reduction in the team size since September 2022.
These measures have resulted in a £2.5 million reduction in software development team annual salaries, a £1.0 million reduction in other annual wages and salaries, and an additional £0.5 million annualized reduction in other administrative expenses. Although there was a one-off non-recurring cost of £0.5 million, these cost-saving measures are expected to benefit the second half of FY24 and beyond.
The company also managed to reduce its net debt by £3.7 million year on year to £18.1 million as of 30 September 2023. That’s naturally higher than the year end figure of £14.5m reflecting investment in inventory in advance of the peak trading period.
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After a tough few years, it’s encouraging to see the company focusing on profitable growth and trimming its costs to offset a weaker trading environment. Meanwhile, investments in AI and planned growth projects such as its second-hand business offer long-term growth potential as the economic backdrop improves.